Improving Service Quality and Productivity - Service Marketing

Group 07Nuwan Ireshinie : 2010/MBA/WE/MKT/14R Shyamali Dias : 2010/MBA/WE/MKT/15

Improving Service Quality and Productivity

Integrating Service Quality and productivity Service Quality Disconfirmation Models Vs. Perception Models Perspectives of Service Quality Dimensions of Quality Gaps Model – Identifying service quality problems How Customers Evaluate Online Businesses Measuring Service quality – Soft and Hard measures Tools to Analyze and Address Quality Problems Defining and Measuring Productivity Improving Service Productivity Conclusion

Agenda

• Quality and productivity are twin paths to creating value for both customers and companies

• Quality - � focuses on the benefits created for customers• Productivity - addresses financial costs incurred by firm

Deliver Quality Experience to Customers

More Efficiently

Achieve Long term Profitability

Integrating Service Quality and Productivity Strategies

“A comparison of expectations with performance”

What is Service Quality ?

However, there is debate

Disconfirmation Models Vs Perception Models

Expected Performance Perceived Performance

Comparison

P>E P<EP=E

Positive Disconfirmation Confirmation Negative

Confirmation

Satisfaction Neutral Dissatisfaction

Disconfirmation Models

SERVQUAL ( Parasuraman et al, 1985)

Satisfaction= f (Perception)

Perception Models

SERVPERF ( Cronin & Taylor, 1992)

• The Transcendent view of quality

• The Manufacture based approach

• User bases definitions

• Value based definitions

Perspectives of Service Quality

• Tangibles• Reliability• Responsiveness

• Competence• Courtesy • Credibility• Security

• Access• Communication• Understanding the customer

Assurance

Empathy

Dimensions of Quality

Identifying and Correcting Service Quality ProblemsGaps Model in Service Design & Delivery

• Gap 1 - Knowledge Gap• Gap 2 - The Policy Gap• Gap 3 - The Delivery Gap• Gap 4 - The Communication Gap• Gap 5 - The Perception Gap• Gap 6 - The Service Quality Gap

Strategies To Address Gaps in Service Quality

Strategies to close the gapEducate Management about what customer expect

Implement market research procedures. Implement an effective customer feedback system. Increase interactions between customers and

management. Facilitate & encourage communication between front line

staff and management.

Challenges Customers’ expectations are differ and changing Management ability to understand the customers’

expectations.

Gap 1- Knowledge Gap

Strategies to close the gapEstablish the right Service processes and specify standards

Get the customer service process right Develop tiered service products that meet

customer expectations Set, Communicate & reinforce measurable

customer oriented service standards for all divisions

Challenges

Gap 2 – The Policy Gap

Gap 1 leads to create Gap 2 Different Customer expectations

Strategies to close the gapEnsure that performance meets standards

Ensure that customer service teams are motivated and able to meet service standards.

Install the right technology, equipment, support processes and capacity.

Manage customers for service quality.

Challenges

Gap 3 – The Delivery Gap

Can only customer service team do it? Right people to do it? Do every company do customer expectation management?

Strategies to close the gapClose the internal communications gap by ensuring that communications promises are realistic and correctly understood by customers.

Educate managers responsible for sales and marketing communications about operational capabilities

Ensure than communications content sets realistic customer expectations.

Be specific with promises and manage customers’ understanding of communication content.

Challenges

Gap 4 – The Communication Gap

Understanding of business by advertising agency

Strategies to close the gap

Challenges

Tangibilize and communicate the service quality delivered.

Make service quality tangible and communicate the service quality.

Gap 5 – The Perception Gap

Will it lead to higher expectations?

Strategies to close the gap

Challenges

Close gap 1 to 5 consistently meet customer expectations

Gap 6 – The Service Quality Gap

Individual customers are different and same customer changing

How Customers Evaluate Online Businesses:

Seven Dimensions of E-S-QUAL

Accessibility : Is site easily found?

Navigation: How easy is it to move around the site?

�Design & presentation: Image projected from site?

Content & purpose: Substance and Richness of site

�Currency & accuracy

Firm’s propensity to respond to e-mails, online chat and �other communication media

Responsiveness

Interactivity, customization & personalization

Reputation & security

• Soft measures—not easily observed, must be collected by talking to customers, employees, or others

Provide direction, guidance, and feedback to employees on ways to achieve customer satisfaction

Can be quantified by measuring customer perceptions and beliefs ― For example: SERVQUAL, surveys, and customer advisory panels

• �Hard measures—can be counted, timed, or measured through audits

Typically operational processes or outcomesStandards often set with reference to percentage of occasions onwhich a particular measure is achieved Control charts are useful for displaying performance over time

against specific quality standards

Measuring and Improving Service Quality

• Key customer-centric SQ measures include: Total market surveys, annual surveys, transactional surveys Service feedback cards Mystery shopping Analysis of unsolicited feedback—complaints and compliments, focus group

discussions, and service reviews

• Ongoing surveys of account holders to determine satisfaction in terms of broader relationship issues

• Customer advisory panels offer feedback/advice on performance

• Employee surveys and panels to determine: Perceptions of the quality of service delivered to customers on specific dimensions Barriers to better service Suggestions for improvement

Soft Measures of Service Quality

Unsolicited Customer Feedback :

• Customer Complaints

• Compliments

• Suggestions

Soft Measures (contd.,)

• Control charts to monitor a single variableOffer a simple method of displaying performance over

time against specific quality standards Are only good if data on which they are based is accurate Enable easy identification of trends

• Service quality indexesEmbrace key activities that have an impact on customers

Hard Measures of Service Quality

Tools to Analyze and Address Service Quality Problems and Productivity

Tools to Analyze and Address

Service Quality And Productivity problems

Root cause Analysis : Fishbone Diagram

Tools to analyze and address Service Quality

• Brainstorm• Resulting factors / Causes are categorized• 5 Categories – Equipment, Manpower, Material, Procedures, Other. • Manufacturing 6M - Man power (People), Method (Process),

Machines (Technology), Materials, Measurements, Mother nature (Environment)

• Services – Extended to 8 categories - People -front/back stage and Information

Causes can be traced back to root causes with the 5 WHYs (who, what, when, where, and why, how) technique

Tools to analyze (contd.,)

Source : Adapted from Lovelock (1993)

• Based on the 80/20 Rule– Consumer needs formulated into a standard – Firm aims at achieving this standard – But due to variation in the factors of production (men, material,

methods, and machinery), of some items that do not conform to this standard is inevitable.

– Defectives - may not be of the same severity– Pareto Principle applied in defect analysis - to identify the vital few

defects, which result in many numbers of defectives so that more effort could be made to concentrate on eliminating these vital few defects.

• Purpose – identify the principle causes of observed outcomes

Tools to analyze (contd.,)Pareto Analysis :

Examples for Pareto principle covering many fields are;

• Marketing - few customers account for the bulk of the sales.

• HR - few percent of the employees are responsible for most of the absenteeism.

• Purchasing - few percent of purchase orders account for bulk of the purchase costs.

• A few countries account for most of the world’s population.


The Pareto Principle represented in a diagram

Eg: Most common sources of defects, the highest occurring type of defect, or the most frequent reasons for customer complaints etc.,



Combining fishbone diagram and Pareto analysis – highlights the main causes of service failure

Blueprinting :

• Visualization of service delivery – sequence of front stage interactions (by customers) and supporting back stage activities

• Identify points where failures are most likely to occur • Ripple effect • Identify specific failures that occur mostly which needs urgent

attention


• TQM – Total Quality Management– A collection of principles, techniques, processes, and best practices that

over time have been proven effective– Continuous improvement – based on the premise that the quality of products and processes is the

responsibility of everyone - management, workforce, suppliers, and customers

• Have processes that continuously collect, analyze, and act on customer information.

• All of the TQM model's elements work together to achieve results

Systematic approaches to quality and productivity improvements and process standardization

TQM in Service - Twelve Critical Dimensions for Implementation

• Top management commitment and visionary leadership• Human resources management• Technical system, including service process design and process

management• Information and analysis system• Benchmarking • Continuous improvement • Customer focus• Employee satisfaction• Union intervention and employee relations• Social responsibility• Servicescapes• Service culture

Systematic approaches (contd.,)

• Internationally recognized standard of quality – facilitate int.trade• Comprises: requirements, definitions, guidelines etc.,• Registration process :

– document review by the registrar – pre-assessment - which identifies potential noncompliance in the quality system or in the

documentation– assessment - by a team of 2/3 auditors – Surveillance / periodic re-audits - to verify conformity with the practices and systems

registered.

• ISO 9000 Principles ?1. A Customer Focus2. Good Leadership3. Involvement of people4. Process approach to quality management5. Management system approach6. Continual Improvement7. Factual approach to decision making8. Supplier relationships


ISO 9000 Certification

Malcolm Baldrige Model

• The Baldrige Criteria for Performance Excellence provide a systems perspective for understanding performance management.

• Goal : Promoting best practices, achievements are publicized in US firms • Assess firms on 7 areas ;

• Leadership commitment • Planning priorities for improvement• Information and analysis• Human resources management• Process Management • Customer and Market focus• Business Results

• Improve Organizational performance• Award winners - Ritz Carlton, FedEx, AT&T


Baldrige Award

• Quality management initiative by Motorolla• Approach to reduce defects , reduce cycle times, improve productivity• Achieving a quality level of 3.4 DPMO (Six standard deviations means 3.4 defects per million)

Six Sigma projects must be linked to the organization's business plan

• Defect reduction approach overall business improvement approach• 2 Strategies :

• Process improvement – aim at identifying and eliminating the root cause , thereby improving service quality

• Process design / Redesign – act as a supplementary strategy to improvement strategy

• DMAIC model – analyzing and improving business processes


Six Sigma

• Define opportunities• Measure key steps / inputs• Analyze to identify root causes• Improve performance• Control to maintain performance


Methodology to Improve and Redesign Processes


• Financial implications related to quality improvements– Disappointed results– Run into financial difficulties– Poor / incomplete execution of quality programs

• CBA of quality initiatives

• ROQ based on assumptions;– Quality is an investment– Quality efforts must be financially accountable– Possible to spend too much on quality– Not all quality expenditure are equally valid

• TF, expenditure on quality improvement must be related to anticipated increase in profitability

• Feasibility of new quality improvement efforts must be ;– Costed in advance– Related to anticipated customer response

ROQ – Return on Quality

When does improving service Reliability Become Uneconomical ??

Determining the optimal level of Quality

Quality and productivity improvement strategies together. Deliver quality experiences more efficiently to improve long-term

profitability.

• Defining Productivity in a service Context– Productivity measures the amount of output produced

relative to the amount of inputs used. – Improvements in productivity require an increase in the ratio

of output to inputs ;» Cutting resources required to create a given

volume of output » Increasing the output obtained from a given level

of inputs

Defining & Measuring Productivity

• Productivity, Efficiency and Effectiveness– Productivity : financial valuation of outputs to the inputs – Efficiency : comparison to a standard, time-based – Effectiveness : degree to which an Organization is meeting its goals

• Classical technique : – Focus on output and not outcome / efficiency and not effectiveness – Variability – variation in quality / value of service

Eg: counting the number of calls answered per unit of time – Increased customer throughout at the expense of perceived service

quality Eg: hair dresser – productivity and efficiency achieved but not

effectiveness

Defining & Measuring Productivity (contd.,)

• Intangible nature of service performances• Output is frequently difficult to define – Output – labor (physical / intellectual), material, energy and

capital Eg: Information based services – very difficult to measure

• People processing services – hospitals , garages, restaurants (fast food), banks, consulting firms ??

• Organizations that consistently deliver higher effective outcomes desired by the customers can demand ;– a higher price – Build a loyal and profitable customer base

Why measuring productivity in services is difficult ?

• Controlling cost at every step in the process

• Reducing waste of materials and labor

• Matching productivity capacity to average level of demand

• Replacing workers by automated machines and customer operated self services technologies

• Provide employees with equipment and data

• Training employees to work more productively

• Broadening the array of tasks that a service worker can perform

• Installing Expert Systems

Improving Service ProductivityGeneric Productivity Improvement Strategies

Productivity can be improved incrementally. But, major gain require redesigning customer service processes.. .

WHEN ? when customers face unbearably long wait times !

Long wait REDESIGN

Improving Service Productivity (contd.,)

Customer Driven Approaches to Improve Productivity :

• Change the timing of customer demand– Use service outside peak hours and give incentives

• Encourage use of alternative service delivery channels– Internet / self-service machines

• Ask Customer to use third parties– Specialist intermediaries – Eg: insurance brokers, travel agencies

Improving Service Productivity (contd.,)

• Front Stage efforts to improve productivity– High contact services : enhancements are visible

• Passive acceptance• Customers to adopt to new patterns • Market research (loss of business, cancel out productivity

gains)

• Back stage efforts to improve productivity– Depend on whether they affect or are noticed by

customers – Ripple effect (extends front stage and affect customer)– Prepare customers for the changes – Promote as a service enhancement

How Productivity Improvements Impact Quality and Value

Implications :

• Tends to centre on efforts to eliminate waste and reduce labor costs ; – Cutback on frontline staff (remaining work hard/fast) – Insufficient personnel to serve customers – Staff exhausted, make mistakes, treat customers

badly – Multi-tasking : poor job at each task– Caught between trying to meet customer needs and

achieve management’s productivity goals

Caution on Cost Reduction Strategies

• Better to look for Service process redesign opportunities that leads to ;– drastic improvements in productivity – Increase service quality

• Key challenge for service firms :– Deliver service quality and satisfaction to customer– In cost effective ways for the firm

• Name of the game :– Seek improvements that offer quantum leaps in service quality and

productivity at the same time

• Service Quality (efficiency and effectiveness) + Productivity Long term Profitability

Conclusion

Thank you

Improved Service Quality and Productivity Profitability

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